Financial Management

Finance

• As the art and science of managing money which

includes financial services and financial instrument.
• Referred as the provision of funds and their effective
utilization in business concern.
 Why Study FINANCE?
• Finance is simply the management of money.
• As long as we live in a market economy the management is
important to maximize the use of the money in order to
receive its best value.
 Financial Managements

- Is a managerial activities concerned with planning,

organizing, acquiring, utilizing and
controlling of firm financial resources to generate returns on its
invested funds.

- Process for and analysis of making financial decisions in the business context.
• The raising and using of capital for
generating funds and paying returns to
supplier of capital is the finance
function.
 Goal of Financial Management

• Is to maximize the current value per

share of the existing stock or
ownership in a business firm.
 Scope of Financial Management
1. Traditional – primarily concerned with the acquisition, financing and
management of assets of business concern in order to maximize the wealth of the
firm for its owner.
Functions:
a. Procurement of Short term as well as long term funds from financial institutions.
b. Mobilization of funds through Financial instruments such as equity shares,
preference share, debentures, bonds, notes and so forth.
c. Compliance with the legal and regulatory provisions relating to funds procurement,
use and distribution as well as coordination of the finance function with the
accounting function.
2. Modern Approach
- the Finance Manager is expected to analyze the business firm and
determine the following:

a. The total funds requirements of the firm

b. The assets or resources to be acquired and
c. And the best pattern of Financing the assets
 Types of Financial Decision
1. Investment Decisions- selection of asset in which funds are invested by firm
2. Financial Decisions – assert that the mix of debt and equity chosen to
finance investments should maximize the value of investments made .

3. Dividend Decisions – concerned with the determination of quantum of

profits to be distributed to the owners, the frequency of such payments and the amount
to be retained by the firms.
Net Profits are generally divided into two:
a. Dividend for share holders
b. Retained Profits